If you are rejected when you apply for a credit card, it can be difficult to work out what to do next. Should you reapply? Should you try to apply for a different card? In this article we look at the top 5 things you should do if you are turned down for credit to increase your chances of being successful in the future.
1) Stop applying for credit
While it can be tempting to try your luck with a different credit card or loan, you need to keep in mind that all of these applications leave a hard "footprint" on your credit file. If you are rejected for a series of cards in quick succession, this will be noted on your credit report with the major credit rating agencies, potentially making it more difficult to secure credit in the future. Instead, find out why your application was rejected before doing anything else.
2) Work out why your application has been rejected
It is within your rights to ask the credit card company why they rejected your application and whether it was to do with something on your credit file. While they may not go into details or pinpoint the exact problem, they will be able to tell you which credit reference agency they used and indicate if you were unsuccessful because of something on this report. If after speaking to the credit card company you are still unsure why your application was rejected then run through the following questions. Once you determine the reason for the rejection you will then be in a better position to increase your chances of being accepted by an alternative credit card provider.
Did you meet the eligibility criteria?
The card you applied for will have specific eligibility criteria, which includes factors such as the minimum income you need to earn each year, whether you are self-employed, as well as your credit score. The official criteria will be included in the product details on the credit card company's website. You will also need to be over the age of 18, be able to provide a UK-based home address and bank account details.
Do you have impaired credit?
The card provider will assess your overall credit-worthiness based on your past financial behaviour. Depending on the card, some minor misdemeanours, such as late payments, may be accepted. However, bigger infringements, such as defaults, CCJs or bankruptcy will mean it is likely you will have to opt for a specialist lender. For details of cards that are more likely to accept you if you have a less-than-perfect credit score, read our articles "Compare the best credit cards if you have bad credit card" and "Credit-builder cards - which is the best credit card if I have poor credit".
Do you have a credit history?
If you haven't previously borrowed money or have recently moved to the UK from abroad, you may not have sufficient credit history to prove to the credit card company that you will be reliable when it comes to making repayments and staying within the specified credit limits. For ideas on the cards that may accept you with little or no credit history, check out our article "Best first-time credit cards".
Do you have a lot of existing credit arrangements?
The credit card provider will also judge your financial position based on how many loans and other credit cards you already have. If you already have significant levels of debt, it undermines whether you will be able to afford the repayments on a new card and, generally, whether you are a responsible borrower.
Are there mistakes on your credit file?
If there are anomalies on your credit file, such as the wrong address or mistakenly recorded missed payments on previous debts, you could be rejected for a new card. It's a good idea to check your credit reports with one or more of the main credit reference agencies to make sure everything is accurate and challenge any errors. See the section below titled "Check you credit history" for more information.
Are you linked to someone with poor credit history?
If you have a joint mortgage or credit card with someone who has a poor credit record the lender may take this into consideration when reviewing your application.
3) Check your credit history
As your credit history plays a vital role in determining whether you are likely to be accepted for a credit card, it pays to know what is included in it and to gauge your credit score. This is slightly more complicated than you may think, with the main credit reference agencies, Equifax, Experian, TransUnion, each potentially recording different information. What's more, each agency has a different way of calculating an overall credit score and it isn't easy to draw comparisons across all three.
It pays to check your report with Equifax, Experian and TransUnion, looking carefully at:
- Your personal details: Are your name and address details correct and up-to-date, particularly if you have recently moved or changed your name.
- Existing credit agreements: Assess the credit agreements listed on your reports, making sure they are accurate and up-to-date. If anything is listed incorrectly, make sure you raise it with both the credit reference agency and the company you had the agreement with. If there is something completely unexpected listed on your report, it could be an indication of fraudulent activity, such as identity theft, so it pays to check regularly.
- Details of black marks: If you have events such as missed payments, defaults, CCJs, IVAs or bankruptcy on your report, scrutinise the details of them. The effects of these things on your credit score diminish over time, so you need to ensure the timing of when it was recorded is accurate to minimise the impact it has.
- Your overall credit score: If you know whether your credit score is excellent, good, average or poor across all three agencies, it will provide a steer on the types of credit cards you can reasonably be expected to be accepted for. Premium cards with perks and benefits will generally require an excellent credit score, while you will typically have to seek out a specialist lender - and pay a higher APR - if you have a poor credit rating. Remember, lenders use the information on your credit report to calculate their own version of your credit score which they then use to determine whether to lend to you or not.
4) Find ways to improve your credit score
As well as rectifying any mistakes on your credit file, there are a number of ways to increase your credit score. In addition to simply behaving in a sensible and responsible way with any credit agreements you already have - making repayments on time, sticking to the terms of conditions of the agreement, making overpayments if possible - you can take a number of steps to further improve your credit score. These include:
- Making sure you are on the electoral roll
- Closing unwanted or unused credit card accounts
- Reducing - or completely paying off - any overdraft you have on a current account
There is more advice in our article "How to improve your credit score quickly".
LOQBOX* works by customers saving a set amount of money each month for a year. This is structured as an interest-free loan, with the monthly savings payments recorded as loan repayments. The money is locked away for the year, with LOQBOX reporting the monthly payments to the credit reference agencies to demonstrate the customer's ability to service a loan responsibly. At the end of the year-long "loan", you get the money back and, while you won't have earned interest, you will have improved your credit rating.
There is a full review in our article "LOQBOX Review - Should you use it to improve your credit score?"
Credit reference agency Experian has launched Experian Boost as a way for people to potentially improve their Experian credit score by demonstrating "good habits", such as making regular savings or investments or paying for subscription services such as Amazon Prime and Netflix. It uses open banking to regularly assess your spending to identify any opportunity to uplift your credit score. The key thing to note is that using the service does not guarantee that you will get be accepted by a credit card company, or indeed boost your score in their credit scoring process, it simply improves the information provided by Experian and possibly your indicative credit score with Experian.
A full review can be found in our article "Experian Boost review - can it really help improve your credit score?"
5) Use an eligibility checker
To avoid the risk of being rejected for another credit card, many credit-card companies now provide online eligibility checkers. Although they don't give you a guarantee you'll be accepted, they give you a high level of certainty. They work by the company running a "soft search" on your credit file based on you providing a few key pieces of information, including your name, date of birth and employment details. This search won't be visible to future lenders and won't leave a hard footprint on your file.
Not all credit-card providers have an eligibility checker, so if you are unsure if you meet the criteria for a card, it may be worth seeing if you can find an alternative card that does offer a pre-application eligibility check. Alternatively, look through the criteria extremely carefully and balance it with what is on your credit file before you complete the full application.
For details on which providers offer eligibility checkers, read our article "How to find the best credit card for your needs".
If a link has an * beside it this means that it is an affiliated link. If you go via the link Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. But as you can clearly see this has in no way influenced this independent and balanced review of the product. The following link can be used if you do not wish to help Money to the Masses - Loqbox